What happens if you don’t have enough money to go to college, and your credit stinks? Believe it or not there are options for bad credit student loans. There are two ways to get loans for college in the USA; one is through federal loans and the other is through private loans.

The federal government has loan programs which are fairly easy to qualify for and are independent of credit scores. There is the Stafford loan which is based on income and the interest is paid by the government while the borrower is enrolled, and attending, school. If the borrower graduates, or drops out of school for a certain period of time, the interest and loan is paid by the borrower after a period of 9 months. The greatest part of getting a Stafford loan, besides that it is independent of credit scores, is that it offers a fixed rate throughout the lifetime of the loan.

For students that rely on their parents, there is the Parent PLUS loan which is based on credit and income. To qualify for either type of loan, a certain income level must be met. Stafford loans require a lower income bracket, while PLUS loans require a higher one. Oh the irony, right?

The other type of loan for students is the Perkins loan. This is a purely financial based loan and has a maximum of four thousand dollars a year. The Perkins loan is money borrowed from the government not from specific lenders. The loan is based on need, and every college has a minimal amount available to disperse per year. The rate of the loan is fixed and at a lower interest rate than the Stafford loan.

But what happens when you either a) aren’t approved for either federal loans or b) they don’t cover the full cost of tuition, books and room & board? The answer to that is a private loan.

A private student loan is an unsecured loan offered by private lenders. Private loans are no different than applying for a regular loan. The loan amount and application approval is based on the applicant’s credit score and income. The loan is subject to interest rate hikes during its term, and the borrower usually has to pay the interest, and sometimes make a monthly payment, while they’re in school. Normally, however, the lenders allow borrowers to make interest only payments while they are attending school.

Neither type of government loan is available to students who have defaulted on a previous loan. Those loans must be rehabilitated in order to qualify. Check the Treasury’s website for more information on how to rehabilitate your loans.

In order to qualify for a private student loan, the borrower needs a good credit score. However, there are options if you have bad credit.

A bad credit student loan is available for anyone with a credit score between 550 and higher. Those loans, however, are at very high interest rates and usually include insurance fees (to cover payments in the event you’re unable to make them), along with many other fees.

There are no private bad credit student loans available to those with judgments listed on their credit report, or if they have outstanding past due entries.

For bad credit student loans, if you want to avoid high interest charges, a cosigner is the best option for immediate loans. If you’re able to wait, you can avoid a bad credit student loan altogether. Simply rebuilding your credit can take a year of good payments on a secured credit card and a trustworthy credit counselor.

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